Macroeconomics 2

MACROECONOMICS 1
Macroeconomics
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MACROECONOMIC
S 2
Question 1
According to President Trump's tweet, the US steel industry had hit the global headlines
and according to Trump, it was giving new life and seemed to be thriving (Steil & Rocca,
2019). However, it is after a year following slapping of tariffs by Trump on the imported steel
that has led to the poor performance of the steel industry. The steel industry has been reeling as
the steel prices have declined and currently are at pre-tariff levels. Employment has also become
stagnant a clear indication that the tariffs are not effective. However, if the policies adopted by
Trump's administration were working as scheduled, then the steel industry was anticipated to
outdo the other segments.
The proponents of Trump's tariffs, for instance, the Alliance for American Manufacturing
postulated that more than 12,000 well-paying occupations had been developed or maintained in
both steel and aluminum factories following the implementation of the president's policy in the
first quarter of 2018. They also asserted that vast amounts of investment in the metal mills could
benefit the US in future with the inclusion of the $1 billion that was announced at a US steel
plant at the outskirt of Pittsburgh.
Toyota
According to the head of Toyota in North America, he expressed his concerns and
worries following the imposition of tariffs by Trump on foreign vehicles as this would make it
hard for Toyota to follow through the added $750 million needed in the US investments
(Lobosco, 2019). The head of Toyota went further to assert that it would be challenging as it
would impact the industry in general.
Toyota workers

MACROECONOMIC
S 3
The president of Toyota remarked that Trump's latest move with regards to the
administration of global trade war was a significant drawback for the American consumers and
this was a clear indicator that Toyota's investment was not welcomed in the US and also that the
contributions originating from the American employees are not recognized (Long, 2019). The
directive that was issued by the president, however, was providing Japan and the European
Union a window period to have their trade deals renegotiated with the US and this will ensure
that the American automobile industry together with its workforce are protected which means
jobs will not be lost.
Harley Davidson
Trump used tariffs to attack Harley last year when the company announced that it was
planning to shift some of its production located in the US overseas as a strategy to sidestep the
levies by the EU (Bloomberg, 2019). However, Harley Davidson has more than tariffs to
blame for its poor performance. The company seems to struggle on how to attract young bike
riders and instead is planning to provide cheap bikes and sell more of the clothing.
Harley Davidson workers
Harley Davidsons sells motorcycles in the US, and these bikes are manufactured in the
US; however, the units are sold globally with a mix of origins and assembly (Pauly, 2015).
With the EU-associated manufacturing transfer, this will lead to some of the US jobs being lost
though the company never confirmed it. Also, the loss of sales in the EU translates to some
workers losing their positions.
Question 2
` The BP drills could have both positive and negative externalities. Starting with the
positive externalities, both the consumers and the consumers would benefit as the consumers

MACROECONOMIC
S 4
would have more access to supply of oil and the producers on the other side will obtain revenues
from the oil exploration (Riley, 2018). The negative externality is that the BP drills would
disrupt the sea species and the marine ecosystem, mainly through the catastrophic effects of oil
spills. According to course theorem, it states that marginal social benefits and the marginal social
costs should be evaluated. In this case, if the MSC is higher, then the viability associated with
resource allocation for such an exchange gets lost.
On the other hand, if MSB is greater than MSC, then this leads to efficiency in resource
allocation. In this case, the MSB associated with drilling activities is greater, making it optimal
to continue with oil exploration. However, there will be adverse impacts related to oil drilling,
and government regulations would have a significant effect as they would create countrywide
awareness.
The case of a neighbor having a loud party translates to the neighbor enjoying the music,
thus gaining satisfaction from it, and this would be his MSB. However, this only adds stress and
disturbance to the surrounding neighbors who may be experiencing stress from the loud party
music, and this is the negative externality. The optimality will arise when the neighbor reduces
the loud music to acceptable limits considered by society. In this case, the coarse theorem can be
utilized to fathom the inefficiency resulting from such resource allocations.
The case of a car that has got safety features leads to MSB being greater than MSC since
the benefits from the usage of the vehicle are more tangible though the costs here are lesser
compared to the benefits associated with safe driving and the safety of passengers. Thus, the
coarse theorem can be used, and the optimality of the allocated be fathomed. In such a case, it is
imperative for government regulation and intervention to be prioritized since its effect is
enormous on society.